We have received communication from the ministry of finance asking about the details of our capital needs and other business plans like credit growth and capital adequacy ratio (CAR) for the next two years. The exercise is meant to keep the government ready for any kind of fund support we want from them. They want to know whether our capital plans are in tandem with the expansion plans or if there is any gap, said a CMD of a prominent public sector bank.
The R21,000 crore rights issue of the countrys largest bank State Bank of India (SBI) is being delayed as the government is yet to decide whether it wants to provide the cash to retain its existing stake holding at 59% in the bank. It is believed that though the government was keen earlier, its present fiscal constraints may come in the way in providing large amount of funds to the SBI.
SBI is currently busy in preparing an alternative plan to mobilise the required capital so that it can go ahead with its expansion plans for next two years.
While reviewing the financial performance of the PSBs in New Delhi on July 8, the finance minister Pranab Mukherjee, had in fact asked the PSB to do their capital planning much in advance, as it is difficult for the government to provide funds to the PSBs for their business growth, in case it comes at short notice.
Though the Reserve Bank of India (RBI) norms require the banks to maintain capital adequacy ratio (CAR) of 8%, the government insists that the PSBs maintain it at 12% as a matter of extra caution.
As the credit growth is happening at over 20 %, so it is quite obvious that the banks will require capital to fuel the credit growth.
Alok Misra, CMD, Bank of India, said that the bank will go for capital mobilisation as its credit is likely to grow by 20-25% over a period of next three years. Though government has already infused a capital of R1,000 crore in our bank earlier this year, it is not sufficient to take care of banks capital requirement for next three years, said Misra. Bank of India is planning a follow-on public offer (FPO) later this year, said Misra.
But, we will have to wait until we get a good pricing for our shares, he added. Currently, the government has a stake of 65.8% in the bank. Nagesh Pydah, CMD, Oriental Bank of Commerce (OBC), said that the bank is looking at a credit growth of 20% for next three years.
We are fine for next two years, when it comes to the capital requirement. However, we may need fund after two years from now, which we may do by diluting the governments stake in the bank by 2-3%, added Pydah. Currently, the government owns 58% of its stake in OBC. OBC holds a stake of 58% and has got a capital infusion of R1,740 crore from the government which is enough to take care of its business growth for the next two years.
PK Anand, executive director, Punjab & Sind Bank, said that the bank has written to the government a fortnight ago requesting for a capital infusion of R990 crore.
If that happens, then it would take care of the capital requirement of our bank for next three years, said Anand. The bank, which is projecting a credit growth of 23-25% during next three years is having a CAR of 12.9% as of now, and has got government stake of 82% post the IPO which hit the market late last year.